Merger Mondays is back, as consolidation in the consumer storage and hard drive business comes in the form of a $4.3 billion deal by Western Digital to acquire Hitachi’s Global Storage Technologies (GST) unit in a move that will bring together the largest and third largest players in the sector.

The definitive agreement was announced before the bell on Monday, sending the stocks of both companies surging in early trading. Western Digital announced it would acquire Hitachi GST for $3.5 billion in cash and about $750 million in Western Digital Shares, valued at March 4’s closing price of $30.01.

The deal, expected to close by the third quarter of 2011, will require that Western Digital raise $2.5 billion in debt and would give Hitachi a 10% stake in the Irvine, California-based company, and two seats in the board of representatives. (Read Brian Caulfield's take, Apple's iPad Behind Disk Drive Deal).

John Coyne, Western Digital’s CEO, who will keep his job along with all of the firm’s top executives, noted that benefits include “enhanced R&D capabilities, innovation and expansion of a rich product portfolio, comprehensive market coverage and scale that will enhance our cost structure and ability to compete in a dynamic marketplace.”

Advised by Bank of American Merrill Lynch and Goldman Sachs, the combined company will result in the largest consumer based digital data storage companies. Hard drive shipments have been on a downward path as flash drives and tablets eat into their market, according to a report by iSuppli cited by Bloomberg, and will fall by about 4% on a sequential basis in the first quarter of 2011. During the last three months of 2010, Western Digital shipped 52.2 million units while Hitachi GST shipped 30.3 million; Seagate, the second largest player, shipped 48.9 million in the quarter.

The new company, which will retain Western Digital as its name and its headquarters in Irvine, California, will count with the broadest product portfolio in the industry, giving Western Digital a foothold in the traditional enterprise storage business, one of the few sectors of the market it doesn’t dominate, according to the company’s press release.

Shares in both companies, and their rival Seagate, all benefited from the deal on Monday. By 11:43 AM, Western Digital’s stock price had surged 14.8% or $4.45 to $34.46, while Hitachi’s New York-traded American depositary receipts were up 4.5% or $2.77 to $64.01. While the tech-heavy Nasdaq was down 39 points or 1.4% to 2,746, Seagate joined its hard-drive selling competitors in the tear, gaining 10.2% or $1.27 to $13.71.